Accord Company Purchased Land for $120,000 by Making a Cash

question 73

Multiple Choice

Accord Company purchased land for $120,000 by making a cash payment of $38,000 and promising to pay the remaining amount in a later accounting period.What is the net effect of this transaction on Accord's accounting equation?

• A)assets increase by $120,000 and liabilities decrease by $38,000
• B)assets increase by $120,000 and liabilities decrease by $82,000
• C)assets and equity increase by $82,000
• D)assets and liabilities increase by $82,000

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Definitions:

Draft

An order or bill of exchange instructing the payment of a specified sum of money from one party to another, often used in international trade.

Promissory Note

A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.

Signature

A person’s handwritten or digital mark or stamp, used to signify agreement, approval, or identity.

Liability

Legal responsibility or obligation for actions, which can result in the requirement to compensate for harm or damages caused.